32-Khuram Shehzad-Organization Wide Variable Pay Plans
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www.bzupages.com Human Resource Human Resource Management Management Presented by: Presented by: khurram khurram Shahzad Shahzad BSIT07-32 BSIT07-32 Presented to: Presented to: Sir Ahmad Tasman Pasha Sir Ahmad Tasman Pasha Department of Computer Science Department of Computer Science Bahuddin Zakariya University Multan, Pakistan Bahuddin Zakariya University Multan, Pakistan
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Transcript of 32-Khuram Shehzad-Organization Wide Variable Pay Plans
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Human Resource ManagementHuman Resource Management
Presented by:Presented by:
khurram Shahzadkhurram Shahzad
BSIT07-32BSIT07-32
Presented to:Presented to:Sir Ahmad Tasman PashaSir Ahmad Tasman Pasha
Department of Computer ScienceDepartment of Computer ScienceBahuddin Zakariya University Multan, PakistanBahuddin Zakariya University Multan, Pakistan
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Chapter name :Chapter name : Pay For Performance And Pay For Performance And
Financial Incentives Financial Incentives
Organization Wide Variable Pay Plans
Incentives For Blue-collar JobsIncentives For Blue-collar Jobs
TopicsTopics
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ContentsContents
Organization Wide Variable Pay PlansOrganization Wide Variable Pay Plans
What is Incentive?What is Incentive plan?Organization wide incentive plansESOPScanlon PlansAt risk Variable Pay Plans
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What is incentive?What is incentive?
“Rewards paid to workers whose production exceeds some predetermined standard.”
Rewards can be in the form of bonus, vehicles, house facility and by many other ways.
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What is incentive Plan?What is incentive Plan?
“ A plan in which production standard is set for the workers who exceeds the production standard ”.
ExampleExample“ NFC Marketing Sales Officer ” is rewarded on the basis of fertilizer sales in his region.
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What is Organization wideWhat is Organization wide incentive Plan?incentive Plan?
“ Incentive Plans in which all employees can participate ”.
Here Production Standard is set for all employees of an organization.
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Types Of Organization wideTypes Of Organization wide incentive Planincentive Plan
Profit Sharing Plans ESOP Scanlon plans At Risk Variable Pay Plans
80% of the companies using profit sharing use the deferred option.
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Organization wide incentive PlansOrganization wide incentive Plans
ESOPESOPESOPESOP ProfitProfitSharingSharing
ProfitProfitSharingSharing
Scanlon PlansScanlon PlansScanlon PlansScanlon Plans At Risk Variable At Risk Variable Pay PlansPay Plans
At Risk Variable At Risk Variable Pay PlansPay Plans
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Profit Sharing PlansProfit Sharing Plans
“ Plans in which employees receive a share of the firm’s annual profit. ”
Profit sharing is not dominant in many industrialized countries.
Participant EligibilityParticipant Eligibility
Any employee age 21 and older who has completed two years of service must be included in the plan. (This can be vary from organization to organization)
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Cash or current distribution plans
Deferred plans
Both
Profit Sharing PlansProfit Sharing Plans
CombinationsCombinations
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Cash plansCash plans
Employees receive cash shares of the firm's profits at regular intervals.
Deferred profit-sharing plansDeferred profit-sharing plans
A predetermined portion of company profits is placed in each employee’s account under a well organized department.
Profit Sharing PlansProfit Sharing Plans
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The company contributes a portion of its profits to a pool that will be distributed among eligible employees. The amount distributed to each employee may be weighted by the employee's base salary. so that employees with higher base salaries receive a slightly higher amount of the shared pool of profits. Generally this is done on an annual basis.
How does Profit sharing work?How does Profit sharing work?
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Boost productivity and Morale. Brings groups of employees to work together toward a common goal
Helps employees focus on profitability.
Enhances commitment to organizational goals.
Advantages of Profit Sharing Advantages of Profit Sharing PlansPlans
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ExampleExample
Lincoln Electric Company HERE Profits(15%-20%) are distributed to employees based on their individual merit rating.
Home Depot Organization It distributed $90 million in 2003 using Profit Sharing Plan
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Employee Stock Ownership PLANEmployee Stock Ownership PLAN(ESOP)(ESOP)
A corporation annually contributes its own stock or cash (with a limit of 15% of compensation) to be used to purchase the stock to a trust established for the employees.
“ESOP is a retirement plan in which the company contributes its stock to the trust. The trust distributes the stock to employees on retirement or separation from service”.
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The trust holds the stock in individual employee accounts and distributes it to employees upon separation from the firm if the employee has worked long enough to earn ownership of the stock.
Employee Stock Ownership PLANEmployee Stock Ownership PLAN(ESOP)(ESOP)
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Advantages Of ESOPAdvantages Of ESOP
ESOP help employees develop a sense of ownership and commitment to the firm, and help to build teamwork.
No taxes on ESOP are due until
employees receive a distribution
from the trust, usually at retirement.
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Example Of ESOPExample Of ESOP
Thermacore Company
Thermacore is a private company and itUses the ESOP system to give seniorityto their employees.
Seniority Formula
15% of company income 15% of company income × employee bonus pool %age rate× employee bonus pool %age rate
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Scanlon PlanScanlon Plan
“An incentive plan developed in 1937 by Joseph Scanlon and Designed to encourage cooperation, involvement and sharing of benefitscooperation, involvement and sharing of benefits ”.
Important FeaturesImportant FeaturesCo-operation of employeesCo-operation of employeesMission and PoliciesMission and PoliciesCompetencyCompetencySharing of benefits formulaSharing of benefits formula
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At Risk Variable Pay PlansAt Risk Variable Pay Plans
“Plans that put some portion of the employee’s weekly, monthly and yearly pay at risk, subject to the firm’s meeting it’s financial goals ” .
If employees meet or exceed their goals, they If employees meet or exceed their goals, they earn back not only the portion of their pay that was earn back not only the portion of their pay that was at risk but also some incentives. at risk but also some incentives.
If they fail to meet their goals, they forego some If they fail to meet their goals, they forego some of the pay they would normally have earned.of the pay they would normally have earned.
Important RulesImportant Rules
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ContentsContents
Incentive Plans For Blue Collar JobsIncentive Plans For Blue Collar Jobs
Piecework Plan
Straight Piecework Plan
Standard Hours Plan
Merit pay plan
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Piecework PlansPiecework Plans
“A system of pay based on the number of items processed by each individual worker in a unit of time, such as items per hour or items per day. ”
ExampleExample
Programmer Job
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Straight Piecework PlanStraight Piecework Plan
“An incentive plan in which a person is paid a sum for each Item he or she makes or sells, with a strict proportionality Between results and rewards. ”
ExampleExampleIf Programmer develops an outstanding software for an organization that is above the expectations of organization then he will be rewarded.
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Standard Hour PlanStandard Hour Plan
“A plan by which a worker is paid a basic hourly rate but is paid an extra %age of his or her rate for production exceeding the standard per hour or per day similar to piecework payment but based on a percent premium.”
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Merit Pay PlanMerit Pay Plan
“Any Salary increase awarded to an employee based on his or her individual performance.”
ExampleExamplePromotion system in private sector in Pakistan.
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